Explainer: What’s with all the changes to Houston, Harris County, HISD property taxes?

The Texas State Capitol building in Austin, Texas, U.S., on March 15, 2017.

Photo: David Paul Morris / Bloomberg

Harris County is set to hike its property tax rate, Houston just cut its own, and Houston ISD trustees are expected to lower the school property tax rate on Thursday.

Each of the moves is dictated by revenue caps that limit how much Harris County, Houston and Houston ISD can raise through property taxes.

Let’s start with the city. In 2004, voters approved a cap that limits annual property tax revenue growth to the combined rates of population growth and inflation or 4.5 percent, whichever is lower. As property values typically rise each year, City Council often has to cut property tax rates to stay under the cap. Council members did just that on Wednesday, cutting the rate for the fourth time in five years.

The owner of a $250,000 home, city analysts calculate, will save about $40 in the first year under the cut.

The property tax changes for Houston ISD and Harris County were dictated by the tax reform package passed by the Republican-controlled Legislature this spring.

One bill limited year-over-year revenue increases for cities and counties to 3.5 percent, above which voter approval is needed. The previous limit was 8 percent.

The Democrats on Harris County Commissioners Court are worried the cap, which goes into effect next year, will hamper the county’s ability to adequately fund health care, flood control and infrastructure amid rapid population growth. So they proposed a one-time tax hike, which budget analysts estimate will cost the average homeowner $38 in the first year, to create a reserve fund.

If approved in October, it would be the first county property tax increase since 1996, and would bring in an additional $222 million in revenue over the current fiscal year. Other local governments, including Travis County and the cities of Austin and San Antonio, are considering similar one-time hikes.

Houston cannot pursue this strategy because of its existing revenue cap.

The Legislature also significantly reformed how Texas public schools are financed. Lawmakers required districts to slash their property tax rates in exchange for more support from the state. Houston ISD plans to cut rates 5.8 percent. This would save the owner of the average home in the district, worth $220,000, about $150 a year.

HISD, the state’s largest school district, is not expected to receive less revenue in 2020, in part because of the funding boost from the state and also a reduction in its “recapture payment,” which were both included in this spring’s legislation.

Recapture is the state’s method of redistributing local tax revenues from districts with high property values, like HISD, to poorer districts.

Reporters Jacob Carpenter and Jasper Scherer contributed to this story.

Zach Despart covers Harris County for the Chronicle, including Commissioners Court and flood control. He came to Houston from the Burlington Free Press in Vermont and was also the managing editor of the Houston Press. In 2017 he won the Best Feature award from the Association of Alternative Newsmedia for his feature on Venezuelan corruption in Houston and Miami. He is a New York native and graduate of the University of Vermont. Follow him on Twitter or email him at zach.despart@chron.com.